Do large firms benefit more from R&D investment?

Abstract

We examine the importance of firm size in the relationship between research & development (R&D) and firm performance. Our empirical analysis, based on data drawn from Nasdaq-listed companies for the period 2002 to 2017, shows that R&D can have effects of varying magnitudes on firm performance, depending on firm size. When R&D weakens firm performance, the negative effects are more pronounced for small-sized firms, but when the impact of R&D is positive, leading to an improvement in firm performance from increased R&D, largesized firms tend to reap most of the benefits. Accordingly, we show that firm size matters in understanding the scale of the impact of R&D on firm performance.

High growth episodes among R&D intensive firms: Evidence for Europe, US and Japan

“…The starting point in the search for the triggers of high growth episodes is the well-established link between innovation and high growth. Authors have pointed out innovation, in its different shapes, can trigger high growth and have confirmed this relationship in empirical settings (Ibhagui, 2019;Lee et al, 2017). Therefore, the focus is on innovation, which is the output of a process internal to the innovator where internal and external knowledge is recombined.…”

“…Eventually, these spillovers strengthen a recipient firm's internal knowledge base, which can aid innovation in turn (Ibhagui, 2019;Liu and Uzunidis, 2016). Literature, rooted in economics, has emphasised the importance of inter-industry R&D spillovers for business growth (Ibhagui, 2019;Kancs and Siliverstovs, 2016;Lee et al, 2017).…”

“…Knowledge produced by the investment in R&D can reach firms through some channels such as the scanning efforts of competitors (Giovannetti and Piga, 2017) or the mobility of R&D workers (Fernandes and Ferreira, 2013). Eventually, these spillovers strengthen a recipient firm’s internal knowledge base, which can aid innovation in turn (Ibhagui, 2019; Liu and Uzunidis, 2016). Literature, rooted in economics, has emphasised the importance of inter-industry R&D spillovers for business growth (Ibhagui, 2019; Kancs and Siliverstovs, 2016; Lee et al, 2017).…”

The impact of research and development expenditure on firm performance and firm value: evidence from a South Asian emerging economy

“…Moreover, the impact is more severe for small companies when R&D is negatively linked to firm performance. In other words, small businesses suffer as a result of the negative impact of R&D expenditure on firm performance (Ibhagui, 2019).…”

“…R&D investment influences firm performance more positively in the manufacturing companies rather than the non-manufacturing companies (Beld, 2014). Depending on the size of the business, R&D may have varying effects on its performance where large firms may be benefited the most when R&D investment has positive association with firm performance (Ibhagui, 2019). The pharmaceutical industry in the context of an emerging economy evidenced significant positive non-linear association between R&D expenditure and firm financial performance along with market performance controlling some specific variables (Ferdaous and Rahman, 2017).…”